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Economy Faces New Pressures

The boom years are over, the Island population is aging at a rapid rate and an underground economy — conservatively estimated at $34 million in unreported wages — threatens to undermine the stability of the Island community.

This is the conclusion of a recent study prepared for the Martha’s Vineyard Commission by John J. Ryan, a consultant with Development Cycles in Amherst.

Titled Martha’s Vineyard Economic Profile, the 57-page study is part of the Island Plan, a comprehensive long-range master plan for the Vineyard that is under way at the commission. The study is posted on the commission Web site (mvcommission.org) and on the Gazette Web site (mvgazette.com).

The economic study includes a blunt and detailed analysis of the Vineyard economy and its various working parts — from seasonal to year-round to the influx of foreign workers. And in what the report calls a first, it examines the so-called underground economy on the Island, which includes a wide array of people who work for cash without paying taxes, from restaurant workers to child care providers to people who rent out their homes. “Local conditions and culture suggest that the underground economy is not going away and indeed may be growing more rapidly than the reported economy,” the study says.

The study concludes that the Island’s economy is made more precarious by its continued dependence on seasonal industries.

“For all the benefits of an economy based on serving the vacation needs of its wealthy visitors (lower taxes, lower off-season population and demands) there is a downside to putting all of one’s eggs in this basket,” the study declares. “It will inevitably create more economic stratification, more dependence on low-wage jobs, less generational continuity and more economic and social needs to address.”

The report shows that growth on the Vineyard has slowed.

The development of the Island beginning in the 1970s led to a dramatic increase in population and an increase in the number of jobs here. The boom continued into the 1990s. Real estate values skyrocketed, along with the number of houses.

Numbers tell part of the story.

Between 1970 and 1979 the Island population increased at an annual rate of 4.6 per cent. Between 1980 and 1989 the rate was 3.02 per cent. Between 1990 and 1999 the rate was 2.88 per cent. But between 2000 and 2006 the rate dropped to .59 per cent.

In 1980 wages on the Vineyard totaled $33.6 million; by 2006 the number had grown to $291 million.

But in the past decade, the number of working families has dwindled and the concentration of children on Island is declining faster than in other parts of the state, the study finds.

“The next 20 years will likely be marked by much slower job and housing growth,” the report says.

The study also acknowledges there may be serious flaws in U.S. Census reporting on the Island:

“Over the years, local officials have consistently argued that the census undercounts the Island’s true residential population. The official 2006 census continues to provide fuel for that controversy. It reports a total Hispanic or Latino population on Island of 229 residents, far fewer than most local estimates of the Island’s residents from Brazil and Central America. Here the absence of reliable data hampers our understanding of trends. If the number of undocumented residents has indeed grown dramatically in recent years, this could offset the officially reported declining rate. Growth may actually be as robust as in the past.”

The study also:

• Sketches the distinct profile of an aging Island population. By 2020 the number of Islanders over the age of 65 is projected to grow from 2,600 to 4,700. By contrast, the number of children is expected to grow only from 3,750 to 4,100. “Finding workers to serve the rapidly growing senior population will be a major consideration for Martha’s Vineyard over the next two decades,” the report says.

• Finds that the Island workforce is nontraditional and entrepreneurial: “Islanders are far more likely than their statewide counterparts to be self-employed, to work part-time or seasonally and to live in adult-only households . . . More than three quarters of all workers work in enterprises with fewer than five employees.”

• Analyzes wages. Low wages are higher here than on the mainland and by contrast, high wage jobs tend to pay less here than on the mainland. “The Island’s overriding challenge is the need to increase the proportion of high-wage jobs without increasing the need for low-wage workers,” the report says.

The report, completed in January, outlines a series of recommendations for change, with an emphasis on the Island as a “living community” that fosters continued independence, jobs and enterprises that are not related to tourism. It links the economic profile of the Island to the world at large:

“When it comes to environmental vulnerability, it is hard not to see small Islands with rapid growth, significant economic disparities and limited natural resources as microcosms of our planet. Environmental and energy issues will certainly grow in importance as aspects of the Island’s livelihood and commerce. Finding the right balance between growth and stewardship is not likely to get any easier in the years ahead.”

But by far the most compelling part of the report centers on the underground economy — long known here, as well as nationally, but never really analyzed, in part because unreported income is difficult to track.

Mr. Ryan uses available national and local data to examine the topic in some depth. “This is a tricky topic to engage productively, in part because of the inherent moral and ethical issues, in part because it is not clearly known, and in part because of its connection to the politically charged issue of ‘illegal immigration,’ ” he writes. But he adds: “It is important to simply recognize that the underground exists.”

The report estimates conservatively that the underground labor market represents some 1,200 jobs and $34 million in wages.

Also the informal practice of renting out homes on a weekly basis in the summer adds $60 to $100 million a year in unreported income. Much of this income goes to nonresidents.

“The underground economy is directly linked to the perception that the Island houses more residents than are officially reported,” the report says. It continues:

“It also contributes to the sense that there is more money circulating, and that conditions for young adults and poorer residents may not be as bad as official reports indicate.”

The current structure of the Island economy is not good for the health of the Vineyard:

“Leaving aside the issue of lost taxes, the chief significance of the underground economy may be in lost community stability. Workers stay for shorter durations. Since income is often spent elsewhere, the value of that labor does not circulate in the local economy as fully as it might. Residents cannot establish the credit or verify the income needed to purchase homes or borrow for long-term purchases. Though many residents may work under the table for years, the practice promotes focus on a shorter timeframe, with lower investments in capital, training and skill development.”

These issues spring not only from the foreign born population. Still, the report concludes that the Vineyard must not shy from addressing the issues with its foreign-born residents:

“For more than a decade, the Island has seen a dramatic increase in the presence of Brazilian and Central American residents. Yet, in all of that time, it seems little is known about the size, character and essential role of this segment of the community. While this is understandable given the polarization of opinion about foreign residency at a national level, it is unlikely that the Vineyard benefits from any group remaining in the shadows. Some greater level of understanding and engagement seems in order.”